EUR/USD: Soaring energy costs favour the dollar

The strength of crude oil prices continued to weigh on the Euro on Thursday, the sixth day of the joint US-Israeli war against Iran. The de facto closure of the Strait of Hormuz, as well as the lack of visibility regarding the long-term disruption to oil supply, sent the price of a barrel soaring. Brent crude remained near $84, compared to close to $69 before the offensive against the Revolutionary Guards and numerous strategic Iranian sites.

"The USD benefited from a safe-haven influx due to the US's status as a net energy exporter," note SwissLife AM economists, who proposed a central reference scenario: high prices, $80-90 per barrel: hostilities persist. Iran does not completely close the Strait of Hormuz, but oil tankers avoid it. The price increase remains limited thanks to several factors: increased OPEC+ supply, the redirection of approximately 6 million barrels per day via Saudi and Emirati pipelines, high Chinese inventories, and anticipated Iranian exports.

It is worth remembering that oil remains a major driver of overall economic activity in our developed economies, and that a logistical disruption to supply, combined with a sustained price increase, poses a threat to growth. Consequently, many assets, including the EUR, are currently suffering from a sharp contraction in risk appetite.

"The war in Iran serves as a reminder of how dependent the global economy remains on the stability of energy flows, particularly oil. Beyond the immediate market reaction, the ability of prices to remain stable over time is a major challenge," explains Nicolas Domont, managing partner at Optigestion, who elaborates on his reasoning:

"In a context marked by recurring geopolitical tensions and a high sensitivity of markets to supply shocks, commodity stability transcends the purely sectoral dimension. It becomes a central benchmark for both macroeconomic analysis and portfolio management. Energy prices that remain contained facilitate inflation control, clarify the trajectory of central banks, and improve visibility on corporate margins. Conversely, persistent volatility fuels uncertainty about costs, future flows, and financial valuations. It influences inflation, monetary policy, and corporate profitability, and is a key structural element of economic and financial equilibrium."

The crux of the problem, therefore, indirectly lies in the duration of the conflict, initially estimated at four weeks by the notoriously imprecise and unpredictable occupant of the White House. The disruption to crude oil supply, at least in the short term, is directly correlated to this number of weeks, which trading floors are finding extremely difficult to estimate. This is causing significant volatility in crude oil prices, admittedly somewhat less so in the VIX. Politico reported on Thursday that the war is expected to last 100 days, or more than three months.

Oil and natural gas prices, highly volatile since the start of the conflict, will thus constitute a crucial working matrix for currency traders, as downward pressure on prices tends to favor the dollar.

On the statistical front, the latest consumer price index figures for February - before the start of the conflict -published on Tuesday, exceeded expectations, rising by 2.3% compared to 2.1%, excluding volatile items (food, energy, alcohol, and tobacco). Across the Atlantic, the ADP private human resources survey, published Wednesday, reported 62,500 new jobs created in the private sector. This is a preview of the federal Non-Farm Payrolls (NFP) report for the past month, due out Friday.

Right now, the EUR/USD is trading at $1.1606.

KEY TECHNICAL ELEMENTS
Monday's sharp drop ended a period of consolidation above a 100-day moving average, which has just been decisively broken. The signal is negative ahead of the crucial test of the 200-day moving average (in brown). This underlying trend line was broken sharply on 3 March, amid significant volatility.

MEDIUM-TERM FORECAST
Based on the key technical factors we have mentioned, our outlook for the EUR/USD is bearish in the medium term.

Our entry point is $1.1614. The price target for our bearish scenario is $1.1321. To protect your capital, we advise placing a stop-loss order at $1.1721.

The expected profit for this strategy is 293 pips, and the potential loss is 107 pips.